Continuing growth in Indian insurance market
The Insurance Regulatory and Development Authority (IRDA) will issue licences to four new insurance companies to start operations before the end of the current financial year.
The Indian regulatory authorities gave licenses to: life insurers Aegon Religare Life Insurance Company — a joint venture (JV) between Dutch company Aegon and Ranbaxy-promoted Religare; Canara HSBC OBC Life Insurance — JV between Canara Bank, HSBC and Oriental Bank of Commerce; and DLF Pramerica Life Insurance Company — JV between IDBI, Fortis and Federal Bank, as well as non-life insurer Bharti AXA General Insurance company.
R Kannan, member actuary of IRDA said the regulatory authority has issued licenses to six companies so far in this financial year.
With the three new entrants, the number of life insurance companies has increased to 20, while the number of non-life insurance firms has risen to 19.
Meanwhile, life insurance companies offering pure term products that provide a simple life cover will have more money at their disposal. In March, IRDA slashed solvency margins by two-thirds for companies offering these products either on a group basis or on an individual basis. Solvency margin refers to the ability of an insurance company to pay claims.
The move will reduce the cost of capital and enable companies to offer such products at more affordable premiums to policy holders. Earlier, for a sum assured of Rs10 000, policy holders in the age group of 25-30 years were charged a premium of around Rs25. But insurance companies had to allocate Rs32 towards the solvency margin requirements, thus making pure risk products unviable. With the cut in solvency margin requirements, life insurance companies will have to allocate only Rs12. This should lead to a drop in the premiums for policy holders, although the exact quantum would depend on a host of factors, including policy administration charges, commission and claim payment.
However, some insurers believe the regulator should also look at further easing capital requirements. At present, the regulator asks insurers to maintain solvency margins at 150% of the statutory requirement. Insurers say that given the size of the industry, the regulator should look at bringing down the requirement to statutory levels. Others feel that capital requirement on unit-linked plans should be eased, given that most of the investment risks in this product are borne by investors.
